Former Comptroller General of the United States David M. Walker delivered the keynote address at the Washington Policy Center’s Government Reform Conference in April, providing a sobering assessment of the fiscal state of the nation and the growing size and power of government. His speech is excerpted below.
I am here to tell you, our Republic is at risk. Washington is out of touch and out of control. I’ve had the good fortune of going to 26 states and 40 cities as part of the ‘Fiscal Wake-Up Tour’ during the last two years. I’ve been to a number of other states, and many more cities in my capacity as comptroller general of the United States, and now in my capacity as president and chief executive officer of the Peter G. Peterson Foundation. …
Frankly, I’m not just concerned about the sustainability challenges we face. I’m concerned about how far this nation has strayed from the solid foundations that our Founding Fathers provided for us in 1789. And let me mention just a few examples.
First, the size of government. The Founding Fathers believed in limited government. In 1789 the federal government was 2 percent of the economy. Today it’s 20 percent and is scheduled to get a lot bigger.
Second, the composition of government. At the beginning of our republic, the federal government focused on things that realistically only the federal government could do. Responsibilities like national defense, foreign policy, treasury, postal service, Congress, and the Executive Office of the President of the United States. Today, the 38 percent of the budget that is deemed to be ‘discretionary spending’ contains every major express and enumerated responsibility envisioned by the Founding Fathers for the federal government. Every single one. What happened to the provision written by the founders: that any role or function not expressly reserved for the Federal government belongs to the states and ultimately to the people? We have lost our way …
Let me touch briefly on a few sustainability challenges. … Firstly, our federal fiscal challenge. It’s not our current deficits, and it’s not our current debt levels that are the problem. Yes, the deficits are larger than they should be. Yes, our debt levels can hardly be justified given the principles our founders established, and frankly, America’s history, up until the 1970s.
When we incurred significant debt because of wars, whether it was the Revolutionary War, whether it was the Civil War, whether it was World War I, or World War II, our nation had a tradition of paying down that debt as quickly as possible so we did not encumber future generations with burdens that they should not be expected to bear. But since the 1970s, that tradition has gone by the wayside, and it’s time that we think about bringing it back over time.
We have large deficits and debt levels, but the real problems are off-balance-sheet obligations. As per the latest federal financial statements, we have over $44 trillion (there are 12 zeros to the right of that 44) in off-balance-sheet obligations, primarily in the form of unfunded Medicare and Social Security obligations. Adding this number to our nation’s current net liabilities means that our total federal fiscal hole was about $53 trillion as of September 30, 2007. That unfunded hole is getting bigger by $2 to $3 trillion a year by doing nothing. If you balance the budget tomorrow, which we’re a long way from doing, that hole would still grow by $2 trillion-plus a year. $2 trillion-plus a year!
Now, what is $53 trillion? It’s $455,000 per American household. What’s median household income in America? Less than $50,000 a year! Therefore, based on our present policies and programs, the typical American household has an implicit mortgage of over nine times their current annual income, but no house to back that mortgage. That’s the big sub-prime crisis.
